TIDMCCR
RESULTS FOR THE YEARED 28 FEBRUARY 2017
Dublin, London, 17 May 2017: C&C Group plc ('C&C' or the
'Group'), a leading manufacturer, marketer and distributor of
branded cider, beer, wine, soft drinks and bottled water announces
results for the year ended 28 February 2017 ("FY2017").
FY2017 FY2017 FY2016 %Change(i) FY2016
Financial Pre-exceptionals Adj. for F/Xand Reported
Highlights US(i)
EURm except per
share items
Net Revenue 559.5 600.7 (6.9%) 662.6
EBITDA(ii) 110.0 113.5 (3.1%) 122.6
Operating 95.0 95.4 (0.4%) 103.2
profit(iii)
Adjusted 23.8 21.9 +8.7% 24.2
diluted
EPS(iv)(cent)
Dividend per 14.33 13.65 +5.0% 13.65
share (cent)
Free cash 58.3 126.4
flow
(excl.
exceptionals)(v)
Free 53.0% 103.1%
cash
flow(v)/EBITDA(ii)
(%conversion)
Net debt(vi) 170.6 163.0
Financial Highlights
-- Volume growth in core brands (Bulmers, Magners, Tennent's) of +2.6%.
Premium and Craft portfolio growing rapidly up +60%.
-- Operating Profit(iii) of EUR95.0 million in line with the
prior year(i) and growing in the second half on a constant
currency basis.
-- Significant increase in brand investment up +12% across our core
brands, including "Hold True" campaign for Magners, new
fount
programme for Tennent's, Outcider launch and "100% Irish"
campaign in
Bulmers.
-- Operating margin improvement of 1.1ppts(i) to 17.0%
following completion of rationalisation and efficiency
programme.
-- Group Net Revenue of EUR559.5 million declined 6.9%(i) on
prior year primarily due to declines in wholesale, own label and
US
revenues. Net revenues from core brands (Bulmers, Magners &
Tennent's)
was more resilient (-2.1%) year-on-year and the trend moving in
the
right direction.
-- Adjusted diluted EPS(iv) increased 8.7%(i) to
23.8 cent per share demonstrating benefits of cost reduction and
share
buyback programmes.
-- Free cash flow(v) of EUR58.3 million reflecting increase in
capital investment including EUR17 million on a new PET line at
Clonmel
and a EUR12 million expansion in trade loan book.
-- Capital return of EUR66 million to shareholders through dividends and
share buybacks in FY2017.
-- Proposed final dividend increase of 5% to 9.37 cent per share. Full
year dividend growth of 5% and dividend cover of 1.7x.
-- Non-cash impairment charge of EUR129 million against the carrying value
of the US business, as indicated in March trading update.
Operating and Strategic Highlights
-- New AB InBev Partnership arrangement with potential to drive volume
and value in Magners.
-- Completion of EUR17 million investment programme at Clonmel facility and
production rationalisation programme delivered the EUR15 million
of cost
savings with minimal disruption.
-- Sustained product innovation with Outcider, the Caledonia Premium Ales
range and Magners Dark Fruit all launched in early 2017.
-- Export division continued to grow - with total volumes up +3.9%, and
Tennent's the stand-out performer delivering +17% growth.
Stephen Glancey, C&C Group CEO, commented:
"FY2017 has been a period of significant activity for the Group.
While trading remained tough, we invested in and delivered volume
growth across our core brands; completed a major rationalisation of
our production foot print; drove efficiencies across the business;
continued to grow our Premium portfolio and Export business; and
secured an important new long-term distribution arrangement with AB
InBev. After this year of consolidation, we are in materially
better shape to meet the ongoing challenges and opportunities
within our industry.
The impact of the devaluation of sterling following the Brexit
vote had a material (EUR8 million) negative impact on the Group's
reported numbers. However, on a constant currency basis, the Group
returned to operating profit(iii) growth in the second half and was
flat year-on-year at EUR95 million. The results reflect the
increased investment behind our core brands, which returned to
volume growth of 2.6% and the EUR15 million efficiency benefits
arising from our production rationalisation programme.
The double-digit volume momentum behind the Magners brand in the
UK provided the right foundation to extend our distribution
partnership with AB InBev. The rationale for expanding the
relationship is compelling for both parties, allowing each other to
play to our route to market strengths, backed by a combined high
quality beer & cider portfolio. This partnership has the
potential to drive volume and value in Magners for years to come as
the category rationalises and distribution synergies are
delivered.
We made further progress during the year in growing and
developing our portfolio of Premium and Craft beers and ciders.
Heverlee, our authentic Belgian lager, grew +41% to over 20kHL and
is now the fastest growing World beer in Scotland and the No.#1
import lager in Northern Ireland(vii). We launched Pabst into the
Millennial market in GB and Menabrea, our authentic Italian
imported lager, secured UK-wide listings with major supermarket and
casual dining groups. Our investment partnerships with some of the
most exciting craft breweries across the UK and Ireland, such as
Five Lamps in Dublin, Whitewater in Northern Ireland and Drygate in
Glasgow, all had a good year.
FY2018 has started in line with expectations but we do remain
cautious given the outlook for the consumer across our markets.
Political uncertainty continues into the current year making
forward predictions on trading patterns and consumer behaviour
particularly challenging. However, our core brands of Bulmers,
Magners and Tennent's are well positioned to convert their volume
momentum in FY2017 into revenue and value growth in FY2018. Our
increase of EUR4 million in investment behind the Bulmers brand and
NPD in Ireland is on-track. We have commenced our planning for
Brexit, particularly in respect of trading on both sides and across
the border in Ireland. A lot of uncertainties remain, but we are
encouraged by the initial determination on both sides to minimise
the potential economic and political friction of a hard land border
on the Island of Ireland.
C&C is a resilient business with strong local brands that
have stood the test of time and a growing Premium and Craft
portfolio. We are confident that the combination of our strong
market positions, well-invested brands, flexible low cost
production assets and expanded partnership arrangements will
deliver value for shareholders over the longer term. Our balance
sheet remains strong at 1.55x Net Debt(vi)/EBITDA(ii) and we
anticipate moving towards our medium term target of 2.0x during
FY2018 through a combination of acquisitions and/or share
buybacks."
Summary notes to preliminary results are set out below. A full
set of notes is contained in the Finance Review.
(i) FY2016 comparative adjusted for constant
currency (FY2016 translated
at FY2017 F/X rates) and North America
revenues to beon a like
for like basis with the current financial
year (as though the Pabst
arrangement had also been in operation
for the whole ofFY2016).
(ii) EBITDA is earnings before exceptional
items, finance income, finance
expense, tax, depreciation, amortisation
chargesand equity
accounted investees' loss after tax.
A reconciliation of the Group's
operating (loss)/profit to EBITDA is set outon page 18.
(iii) Operating profit and profit/finance expense
for the year attributable
to equity shareholders is before exceptional items.
(iv) Adjusted basic/diluted earnings per share
('EPS') excludes exceptional
items. Please also see note 8 of thecondensed
financial statements.
(v) Free Cash Flow ('FCF') is a non GAAP measure that comprises
cash flow from operating activities net
of capitalinvestment cash outflows which form part
of investing activities. FCF highlights the
underlying cash generatingperformance of the ongoing
business. A reconciliation of FCF to Net Movement
in Cash & Cash Equivalents per theGroup's Cash
Flow Statement is set out on page 18 and 19.
(vi) Net debt comprises borrowings (net of issue
costs) less cash & cash equivalents.
Conference Call Details | Analysts & Institutional
Investors
C&C Group plc will announce FY2017 Preliminary Results on
Wednesday, 17 May 2017 at 07:00 BST. The C&C management team
will host a live conference call and webcast, at 08:30 BST (03:30
ET). Dial in details are outlined below:
Ireland: +353 1 696 8154
Europe: +44 203 139 4830
USA: +1 718 873 9077
Passcode: 86503287#
The live webcast will also be available on the home page of the
C&C Group website at: http://www.candcgroupplc.com/
For all conference call replay numbers, please contact FTI
Consulting.
About C&C Group plc
C&C Group plc is a premium drinks company which owns,
manufactures, markets and distributes branded beer, cider, wine,
soft drinks and bottled water. C&C Group brands include:
Bulmers the leading Irish cider brand; Tennent's, the leading
Scottish beer brand; Magners the premium international cider brand;
Tipperary Water; Finches soft drinks, as well as a range of niche,
premium and craft ciders and beers. C&C Group also owns and
manufactures Woodchuck, a leading craft cider brand in the United
States and manufactures and distributes a number of 3rd party
international beer brands in Scotland and Ireland. C&C is also
a leading drinks wholesaler in Scotland and Ireland, where it
operates under the Tennent's and C&C Gleeson brands
respectively. C&C Group is headquartered in Dublin with
manufacturing operations in Co. Tipperary, Ireland; Glasgow,
Scotland; and Vermont, USA. C&C Group plc is listed on the
Irish and London Stock Exchanges.
Note regarding forward-looking statements
This announcement includes forward-looking statements, including
statements concerning current expectations about future financial
performance and economic and market conditions which C&C
believes are reasonable. However, these statements are neither
promises nor guarantees, but are subject to risks and
uncertainties, including those factors discussed on page 22 of this
the Group's FY2017 Preliminary Results Announcement that could
cause actual results to differ materially from those
anticipated.
Contacts
C&C Group plc
Stephen Glancey, Chief ExecutiveKenny Neison, Chief Financial
OfficerJoe Thompson, Investor RelationsTel. + 44 7980 844 580
Investors, Analysts and Irish media
Mark Kenny / Jonathan Neilan | FTI ConsultingTel: +353 1 663
3686Email: CandCGroup@fticonsulting.com
UK & International Media
Tim Robertson / Toby Andrews | Novella CommunicationsTel: +44
203 151 7008Email: TimR@novella-comms.com
Group financial performance
After a challenging FY2016, the Group's key markets and trading
performance was stable over the course of this year. We returned
our three key brands to volume growth of +2.6% (FY2016: -6.4%),
successfully completed a major rationalisation programme and
continued to grow our Premium portfolio and Export business.
Revenue from our key brands was EUR242 million (FY2016: EUR247
million(i)) with the benefit of volume growth offset by competitive
pricing and mix pressures, particularly for Magners. Total revenue
for the Group was EUR559m down -6.9%(i) reflecting weakness in our
wholesale, own label and US activity.
The Group returned to operating profit growth in the second half
of the year on a constant currency basis, benefitting from an
improving trading performance and the cost savings arising from our
site rationalisation programme. Full year Group operating
profits(iii) of EUR95 million (FY2016: EUR95 million(i)) were flat
year-on-year on a constant currency basis. The devaluation of
sterling following the UK's vote to leave the European Union had a
negative (EUR7.8m) impact on reported Group operating profits
year-on-year. Adjusted diluted earnings per share(iv) was 23.8c
(FY2016: 21.9c(i)) up 8.7%.
We continued to invest in our brands and our manufacturing
capabilities, with an up-weighted marketing campaign for Magners
and a new PET line at our cidery in Clonmel. Even with these
investments, the balance sheet remains strong, ending the year at
1.55x Net Debt(vi)/EBITDA(ii). Our preference remains to invest in
the business and adjacent assets but in the absence of value
accretive deals during the year, we returned EUR66 million capital
to shareholders through share buybacks and increased dividend. The
buyback activity reduced our weighted average number of shares by
6.9% during the year.
Strategy
The Group is well placed to benefit from the evolving trends in
our sector and our strategy in domestic and international markets
remains unchanged. In Scotland and Ireland, we combine leading
local brands with unrivalled production and distribution
capabilities. These strong brand/geographic combinations provide
the platform from which we can deliver long-term value from our key
brand assets as well as build out our portfolio through targeted
brand investment, product innovation, agency wins and
acquisitions.
Internationally, given our size and scale, our model is to
partner with local brewers and distributors. In Magners we have one
of the truly international cider assets currently sold in over 50
countries and growing in territories as diverse as Russia, Spain
and Thailand.
Key brands
During the year, we up-weighted investment in our key brand
assets of Magners, Bulmers and Tennent's, returning them to volume
growth in their key markets. Direct brand marketing across these
three key brands rose to 9.5% (FY2016: 8.4%) of net sales value,
with a further 4.0% (FY2016: 3.4%) invested in new founts.
Magners
In Spring/Summer 2016 we re-launched and re-positioned the
Magners Original brand in the UK with new packaging and a
comprehensive marketing campaign under the "Hold True" tag line.
Our activity spanned across TV, Radio, Social Media and
Experiential. Brand volumes responded positively, up 11% in the UK
for the year in a cider market that was (0.5%)(vii) lower.
The clear momentum behind the Magners brand in the UK, provided
the right foundations for entering into a new distribution
partnership with AB InBev. The cider relationship with AB InBev
covers our portfolio in Great Britain as of 1 March 2017. Whilst it
is still early days in the expanded relationship, we are confident
that Magners will continue to grow volume and value within their
strong beer portfolio and distribution infrastructure.
Internationally, Magners saw continued strong growth in Europe
(+12%), opened new markets in Africa and Asia and returned to
growth toward the end of the fourth quarter in the US.
Bulmers
Bulmers returned to volume growth in Ireland, +3% for the year
(FY2016: -13%) in a LAD market that grew +2%(viii). Cider is
experiencing growth well ahead of the overall market with volumes
+6%(viii), boosted by better summer weather and product innovation.
Against this market backdrop, we are investing in both new product
development and a re-enforcement of the core brand equity. In March
2017, we launched Outcider from Bulmers, a new sweeter tasting
cider targeting a more youthful audience. We also are up-weighting
our marketing investment behind the Bulmers brand with the new
"100% Irish" advertising campaign, supported by refreshed livery
and packaging. Competitor activity continues to target Bulmers taps
in high volume city centre bars with a resultant loss of share in
the smaller draught segment, but Bulmers remains in a very positive
position, enjoying a 62% share of the category (FY2016: 65%)(viii).
The incremental investment this year gives us reason to be
confident in the brand taking its fair share of the resurgent
interest in cider.
Tennent's
In Scotland, the trends in LAD improved following the prior year
difficulties when tighter drink-driving legislation reduced
on-trade consumption. Scottish beer volumes were flat(vii) versus a
GB beer market that was -1%(vii). Global Tennent's volumes were
level year-on-year and up +0.4% in the Independent Free Trade (IFT)
channel in Scotland. Our margin in Tennent's improved through the
year after a weak start and a more inflationary environment
provides opportunity for further progress in FY2018. Tennent's also
enjoyed double-digit volume growth in our export markets and is
becoming an increasingly important contributor to our international
story.
Growing Premium and Craft portfolio
The Group made further progress during the year in growing and
developing our portfolio of Premium and Craft beers and ciders. The
portfolio (which includes Chaplin & Cork's, Heverlee, Menabrea
and Pabst as well as our local craft businesses Five Lamps, Dowds
Lane, Drygate and Whitewater) grew volume by 60%. Premium now
accounts for 2% of our own brand volume and is starting to make a
meaningful contribution to bottom line given the premium price
points and attractive margins. Our ambition is to grow this
portfolio to 5% of Group branded volumes over the medium term
through a combination of in-house product development, new agency
wins and partnering with leading local craft brewers.
International growth
The Group enjoyed another year of progress in its international
business, albeit enforced distributor changes in Australia and
India held back overall export volume growth to +3.9% in the year
(FY2016: +14.8%).
The Tennent's brand performed well in export, increasing volume
by +17%. It now accounts for c.30% of the Group's international
division. The performance reflects sustained growth in established
territories such as Italy and South Korea and a promising first
year for South Africa.
Operational efficiency and cost reduction
We made important changes to our production and distribution
footprint during the year as part of our ongoing commitment to
operational efficiency. We closed our plant at Borrisoleigh in
Ireland and sold our cidery and bottling operations at Shepton
Mallet in England for EUR19 million. These changes were essential
for the Group, improving our utilisation rates at our key sites to
mid 70's percent and ensuring the cost competitiveness of our
products. Manufactured volumes per head are up 24% in the year.
Together with the Group-wide overhead reduction activity the
site rationalisation savings helped to successfully deliver the
EUR15 million of cost reductions announced in March 2016. The cost
savings facilitated incremental investment in marketing and price
support to further strengthen our core brand domestic
positions.
Wholesale distribution and agency
Trading in our wholesale and own-label businesses was
disappointing during the year, particularly in the first half.
Wholesaling is highly competitive, price sensitive and in both
Ireland and Scotland we lost both volume and accounts. Wholesale
and own-label volume was down 194kHL (or 14%) in the year and
revenue declined by EUR23 million (or 10%). Approximately half the
drop is due to the loss of some very low margin own-label contracts
in Ireland and in the UK, following on from the closure of Shepton
Mallet. We are working through the challenges and complexities of
running fully integrated brand-led wholesale businesses and the
increased focus improved performance in the second half of the
year.
The AB InBev beers performed well for C&C during the year
with Corona once again proving to be the star performer. The
extended AB InBev distribution partnership signed in December 2016
reaffirms our long-term distribution rights to their current and
future beer portfolio. As part of this agreement, we traded some of
the value we derive from distributing their beer brands in Ireland
and Scotland for value we will derive from AB InBev distributing
our cider brands in the UK. The five year extension of brewing
arrangements for AB InBev brands in our Glasgow site further
cements the relationship.
Strong balance sheet and capital allocation
Our balance sheet remains in robust health with a net debt(vi)
to EBITDA(ii) ratio of 1.55x at the year end. The Group finished
the year with a net debt(vi) position of EUR171 million (FY2016:
EUR163 million) marginally ahead of last year. This is after
returning EUR66 million in dividends and share buybacks, net capex
(excluding exceptionals) of EUR16 million (including EUR17 million
on the new PET line at Clonmel) and investing an additional EUR12
million in our trade lending books in Northern Ireland.
With trade lending and capex at such elevated levels during the
year, free cash flow(v) conversion (pre-exceptionals) at 53%
(FY2016: 103%) of EBITDA(ii) was below our recent trends. With
these items returning to more normalised levels next year we expect
a swift return to our long-term guidance range of 60-70%.
Looking forward, our production facilities are well-invested and
we do not anticipate annual capex requirements beyond EUR10-15
million. Our guidance is medium term target leverage of 2x Net
Debt(vi)/EBITDA(ii). We anticipate we will move towards this level
during the course of FY2018 through a combination of our
progressive dividend policy, acquisitions and/or share buybacks.
Since the year end we have made an acquisition of a small craft
cider business and spent EUR18.7m on share buybacks.
Review by Operating Segment
Ireland
Constant Currency(i) FY2017 FY2016 Change
EURm EURm
Revenue 338.9 347.3 (2.4%)
Net revenue 242.3 252.5 (4.0%)
- Price /mix impact 2.5%
- Volume impact (6.5%)
Operating profit(iii) 48.6 46.9 3.6%
Operating profit margin 20.1% 18.6% 1.5ppts
Volume (kHL) 1,599 1,711 (6.5%)
- of which Bulmers 409 398 2.8%
From a macro perspective, key economic measurements continued to
improve in Ireland during the year.
After a strong start, growth in both the overall LAD market and
the cider category in Ireland slowed in the second half of the
financial year. LAD volume for the full year was +2% (H1: +5%) and
the cider category saw volume grow by +6% (H1: +9%). The
performance of cider was buoyed by better summer weather, as well
as new product development helping to expand the category and bring
in new millennial consumers. Cider is now ahead of where it was two
years ago both in absolute scale and as a percentage of LAD
consumption. Pricing was reasonably stable across both on and
off-trade channels.
Undoubtedly, the trade enjoyed a strong early summer as both the
Northern Ireland and Republic of Ireland football teams progressed
from the group stages of the European Championships.
By contrast, July was poor across the industry. Volumes improved
again in August, helped by some better weather. The second half was
impacted by the absence of the Rugby World Cup, which was in last
year's comparatives and trading was more volatile through the key
Christmas trading period.
Operating performance
After a challenging FY2016, our priorities in Ireland for FY2017
were to stabilise trading and return our key brands to volume
growth. With Bulmers recording positive volume growth of +2.8% and
operating profits(iii) for the Ireland segment up 3.6% in the
period, we succeeded in creating a stable platform from which to
launch our Brand and New Product Development plans in FY2018.
The positive Bulmers volume performance reflected category
growth and was principally driven by a strong performance in
packaged, especially pint bottle (+14%) in the on-trade. The market
share trends of recent periods continued through this year with
Bulmers broadly holding share in packaged in the on-trade and
off-trade but ceding some share in draught. On-trade share is now
at 85% (MAT- Feb16: 91%) and overall Bulmers share is 62% (MAT -
Feb16: 65%)(viii).
In the year, we completed an extensive review of the Bulmers
brand and the competitive threat it is facing from new entrants in
Ireland. The results have given us confidence in the underlying
strength of the brand and informed the investment we are now making
in both the Bulmers brand equity and new product development. Our
key focus for FY2018 is to take advantage of the growing popularity
of cider and re-build share, particularly amongst the new
generation of consumers entering the category. Accordingly, in
March 2017, we launched Outcider from Bulmers, a new
sweeter-tasting cider targeting a more youthful audience. Our
distribution network enabled us to quickly reach 90%+ distribution
in the off-trade and we are rolling out in the on-trade. We are
also up-weighting our marketing investment behind the Bulmers brand
with the new "100% Irish" advertising campaign and refreshed its
branding and packaging from March 2017.
The Group's premium portfolio made further progress in Ireland
with Heverlee volumes up strongly (+44%) to over 10kHL, the brand
doing particularly well in Northern Ireland where it consolidated
its position as the No.1 import lager(vii) and benefitted from our
increased trade lending activity. Our craft offerings within the
Group (Five Lamps and Whitewater) also continued to make good
progress.
Our premium mainstream Tennent's and Magners brands grew by +3%
and +4% respectively, cementing their positions as the No.2 lager
and No.1 cider brands, in Northern Ireland(viii). Our Irish beers
Clonmel 1650 and Roundstone Irish Ale also grew strongly (+21%),
again driven predominantly by take-up in the North of Ireland,
where the benefits of expanded trade lending are evident across the
portfolio.
Wholesale volume was down 3.5% on a like-for-like basis
(excluding the impact of two discontinued contracts). As discussed
above, this reflects the price competitiveness in the market and a
reduction in active customer numbers during the year. This masks a
strong performance in our wine distribution business which grew by
8.9%, driven primarily by the off-trade channel.
Financial performance
Year-on-year volume and revenue performance in Ireland was
adversely impacted by discontinuation of two low margin
distribution and own label contracts in FY2016. In aggregate, these
two contracts accounted for c. 100kHl of volume and EUR10.6 million
of revenue in FY2016 but with a limited contribution to operating
profits. Excluding these discontinued contracts, the Irish segment
total volume would have been -1% and revenue flat year-on-year.
Bulmers revenue was up year-on-year as a consequence of the volume
growth but unfavourable pack and channel mix towards the off-trade
limited the margin benefit.
Overall operating profits(iii) in Ireland were up 3.6%
reflecting improved weighting in favour of branded activity and
cost savings coming through in the second half of the year
enhancing margins.
Scotland
Constant Currency(i) FY2017 FY2016 Change
EURm EURm
Revenue 285.0 296.6 (3.9%)
Net revenue 186.6 198.5 (6.0%)
- Price /mix impact (4.6%)
- Volume impact (1.4%)
Operating profit(iii) 32.6 33.3 (2.1%)
Operating profit margin 17.5% 16.8% 0.7ppts
Volume - (kHL) 1,394 1,414 (1.4%)
- of which Tennent's 1,019 1,032 (1.3%)
The Scottish economy is lagging the rest of the UK, with
Scottish GDP contracting in Q4 2016 and flat for the full year
compared to +1.8% growth in the UK as a whole.
Unemployment is rising, partly due to challenges in the oil
sector, and consumer confidence is more subdued than in our other
domestic businesses. Beer volume was flat in Scotland for the
financial year, having been +1% in the first half. This follows the
prior year's high single digit decline in on-trade consumption
linked to the tightening of drink-driving legislation.
Operational performance
After a positive first half, Tennent's brand volume performance
softened during the second half of the year, in line with the
broader trade. In the Independent Free Trade in Scotland, Tennent's
was up 0.4% in the year (H1: +2%) and still gaining share.
Including off-trade and national accounts, overall volume for
Tennent's in the Scotland segment was -1.3% year-on-year (H1:
Flat).
Rate performance in Tennent's, however, improved significantly
in the second half reflecting a moderation in the competitive
pricing pressures as the volatility caused by the drink-driving
legislation annualised and pricing firmed. We have continued this
momentum on rate in Tennent's into the new financial year.
Brand affinity scores for Tennent's were up again over the
course of the year to 57% (MAT Feb16: 56%), some 13%(ix) ahead of
the nearest rival. We continued to invest in the brand through our
digital media "Wellpark" campaign, T5 five-a-side football and our
various sports sponsorship platforms. Brand salience scores,
particularly amongst the 18-24 age group, have responded
encouragingly. The broad appeal of Tennent's is underscored by its
success and enduring popularity even in Scotland's high-end
'Platinum' outlets, where it has outsold by a 2:1 ratio Craft and
World lagers combined(vii).
To address consumers growing appetite for a range of
high-quality and distinctive ale flavours we launched a range of
'Caledonia' premium bottled beers, including Outpost IPA, Double
Hop and Hopscotch. Each of the great tasting 5% ABV brews has its
own unique flavour profile and is available in 500ml bottles across
the UK and export markets.
In Premium, Heverlee and Menabrea had another year of strong
volume growth and both brands are achieving real traction in the
Scottish on-trade. We launched Pabst into the Scottish trade,
targeted at the Millennials market. Drygate, our joint venture with
local craft brewers Williams Bros Brewing, achieved 10kHL and is
now exceeding original brewery capacity.
As in Ireland, our Scottish wholesale business lost some ground
during the year and was responsible for 9.3kHL and EUR5.5 million
(GBP4.6 million) respectively, of the volume and revenue declines
experienced across the Scotland segment. In the year, we looked to
rationalise the tail of our smaller, uneconomic customers.
Accordingly, overall customer numbers reduced over the year, but
had stabilised and started to increase by year end. Rate of sale
remained steady year-on-year. Several product and pricing
initiatives are underway which, together with some major account
wins towards the end of the year, should stabilise volume and value
performance in FY2018.
Financial performance
Net revenue was down 6.0% to EUR186.6 million reflecting our
weaker rate performance in Tennent's in H1 and wholesale volume and
value tracking below last year. Operating margin was up 2.3ppts in
the second half as the benefit of cost savings flowed through.
Margin for the year was 17.5%, delivering operating profit(iii) of
EUR32.6m, 2.1% down on last year.
C&C Brands
Constant Currency(i) FY2017 FY2016 Change
EURm EURm
Revenue 145.9 154.5 (5.6%)
Net revenue 83.8 90.6 (7.5%)
- Price /mix impact (3.0%)
- Volume impact (4.5%)
Operating profit(iii) 7.3 9.3 (21.5%)
Operating margin 8.7% 10.3% (1.6ppts)
Volume - (kHL) 1,216 1,273 (4.5%)
- of which Magners 485 430 12.8%
The macroeconomic backdrop in the United Kingdom was broadly
positive during the year with consumer confidence and spending
remaining robust despite the uncertainty caused by the European
Union referendum result.
More recently this picture has started to change. The return of
inflation has not been matched by wage growth and is expected to
put a squeeze on disposable incomes over the next 12-18 months.
Retail spending fell in Q1-2017 for the first time since 2013. The
overall cider category was down in the period with volume -0.5%(x).
The on-trade was in moderate growth, buoyed by city-centres and
growth in casual dining.
The GB cider market remains the largest in the world, with
London a key opinion forming city from a global perspective. The
continued success of Magners in the UK is therefore important not
just to our domestic business, but our international ambitions for
the brand.
Operational performance
Over the past five years, the Magners brand has demonstrated its
consumer resilience through a period of significant and disruptive
competitor brand launches. The more recent backdrop is one of
retailer led range rationalisation in LAD and a lessening of
competitor activity in cider. Against this backdrop, we took the
decision to up-weight our investment behind Magners in FY2017 to
build positive momentum in volume and share. The market response to
the Magners "Hold True" campaign has been impressive with brand
family volume +12.8% within the C&C Brands segment and +11%
across the UK as a whole. Our share of cider is up 59bpts at 6.4%
for the full year (MAT Feb16: 5.8%)(xi). Magners Original
consolidated its position as the No.2 brand in apple(vii), gaining
share alongside other local brands at the expense of the market
leader and the international brewers. Our brand health check data
suggests that our marketing investment this year has put the brand
back on the radar of our target audience and instilled our core
message of Magners' authenticity. Our key brand awareness score is
now up to 87%, compared to 60% in 2015.
The momentum behind Magners was helpful in our discussions with
AB InBev regarding distribution rights for the C&C cider
portfolio in the UK. This agreement was concluded and announced in
December 2016 and marks an exciting next stage in the development
of the Magners brand. Magners and our other cider brands will
benefit greatly from AB InBev's best-in-class distribution
capabilities in the UK off-trade and from being marketed alongside
AB InBev's leading portfolio of beers. The ongoing consolidation
activity currently taking place across retailers in the on and
off-trade further reinforces the strategic rationale for the AB
InBev partnership.
Our premium propositions in cider and beer (Chaplin &
Cork's, Menabrea and Heverlee) increased volume by over 60% in the
year. Menabrea made good progress in the licensed restaurant trade
and secured its first grocery multiple listing. This should help
underpin brand awareness and volume growth going forward.
The performance of our portfolio of local English cider brands
was more challenging with price deflation and retailer-led range
rationalisation impacting more heavily on these secondary and
tertiary brands. The transfer of cider production from Shepton
Mallet to Clonmel also resulted in the discontinuation of certain
low margin, own-label contracts. Taken together, these two issues
account for 120kHl of lost volume and EUR6 million (GBP5 million)
of lost revenue within the C&C Brands division.
Financial performance
The brand re-positioning of Magners through the 'Hold True'
campaign successfully delivered volume and share gains. However,
the associated investment in price support and shift in pack mix,
as we came more in line with the competitive set having previously
over-indexed in glass, had a negative impact on yield and margin.
Together with the incremental investment in marketing, this meant
the strong volume performance in Magners did not translate through
to revenue or profit growth in the year under review. Net revenue
and operating profit(iii) were down in the period, at EUR83.8
million and EUR7.3 million respectively. Looking forward, with
continued volume momentum, pack mix more inline with consumption
trends, marketing spend returning to normalised levels and the
benefits of the AB InBev partnership, we are confident in stronger
profit conversion in FY2018.
North America
Constant Currency and adjusted FY2017 FY2016 Change
for the Pabsttransaction(i) EURm EURm
Revenue 24.5 36.9 (33.6%)
Net revenue 23.1 34.7 (33.4%)
- Price /mix impact 0.2%
- Volume impact (33.6%)
Operating profit(iii) 0.7 0.6 16.7%
Operating margin 3.0% 1.7% 1.3ppts
Volume (kHL) 176 265 (33.6%)
After a period of explosive growth and competitor activity
between 2010-2015 (CAGR: +44%), the cider category in the US
started to reverse in mid-2015(xii).
The negative trend continued through the current financial year
with cider volume down -17.6%(xii) over calendar year 2016. More
recent data suggests the negative run-rate has moderated to
c.10-11% and cider is maintaining its share of the overall beer
category at c.1.3%(xii). It is clear that the focus for many
consumers, retailers and distributors has switched into new
adjacent categories of alcoholic soft drinks, flavoured malt
beverages and fruit beer. The sweetness of these propositions has
no doubt taken some consumers, temporarily at least, out of the
cider category. Another feature of the market is the relative
success of imports and local/regional brands over national US
brands.
Operating performance
The long-term distribution partnership between our US
subsidiary, the re-named - Green Mountain Beverages ("GMB") and the
Pabst Brewing Company ("PBC") took effect from 1 March 2016. Focus
in the first six months was on transitioning GMB's sales and
marketing operations into the Pabst distribution platform and
integrating our domestic US and import cider brands into their
broader portfolio. We also jointly developed a new regional, super
premium brand - Vermont Cider Co. for the New England market and
introduced new branding and packaging for existing brands in the
portfolio. We are satisfied that we now have the partner and
infrastructure in place to deliver long-term market share recovery,
but FY2017 was a period of transition for C&C against a
backdrop of negative category trends. Those trends are unlikely to
change in the short term and visibility on recovery of the category
is low at this point.
Operationally, we are focussed on building our pipeline of
contract manufacturing and packaging opportunities to improve
utilisation rates and reduce manufacturing variances.
Financial performance
Total volume was down 33.6% in the year reflecting the overall
declines in the US cider market and the inevitable disruption from
moving to the new partnership arrangements with PBC. Despite the
decline in volume and revenue in the period, reported operating
profit(iii) was broadly flat at EUR0.7m (FY2016: EUR0.6m), with PBC
sharing in the downsides from reduced activity. The near term
volatility in the category pushes out the prospects of Pabst being
able to deliver a meaningful recovery in the short to medium term.
While there is no loss of belief or enthusiasm for the long-term
prospects of cider in the US or in the quality of the Vermont
assets, we have prudently decided to review the carrying values of
our US business. As a result of this review, an impairment charge
of EUR129.4 million was taken with respect of the Group's tangible
and intangible assets in the US. Following this impairment, the
carrying value of our Vermont business is EUR45 million.
It has been a challenging period for the category and our
business but it is not unreasonable to believe that once the
category is through these short term cyclical challenges, it will
resume its long-term growth trend. Past experiences in both the UK
and the US suggests that the 'sweet' fads will run their course and
the attributes that draw consumers to cider - natural, authentic,
fruit based, craft - will ensure a return to positive
territory.
Export
Constant Currency (i) FY2017 FY2016 Change
EURm EURm
Revenue 23.8 24.4 (2.5%)
Net revenue 23.7 24.4 (2.9%)
- Price /mix impact (6.8%)
- Volume impact 3.9%
Operating profit(iii) 5.8 5.3 9.4%
Operating profit margin 24.5% 21.7% 2.8ppts
Volume (kHL) 185 178 3.9%
- of which Magners 100 99 1.0%
- of which Tennent's 54 46 17.4%
Export markets for C&C are all markets outside of the
Ireland, Great Britain and North America.
Our strategy is to build volume through our portfolio of
authentic British and Irish cider and beer brands across Europe,
Asia/Pacific and Africa. The model is to partner with local
distributors, to position the brands as premium/import and retain
all production in our domestic manufacturing facilities, utilising
surplus capacity and reducing capital employed.
We enjoyed another strong year in EMEA, our largest and most
established sales territory. The region delivers c.82% of the
division's volume which was up +14% with good performances from
more established markets such as Spain and France where Magners was
+5% and +21% respectively, and Tennent's was up +43% and +105%.
Tennent's continues to perform well in Italy as a
speciality/premium lager (32kHL). New territories also performed
well with Eastern Europe now over 10kHl, including Magners as the
first draft cider available in the nascent but fast growing Russian
cider market. We continued to seed selected African markets,
reaching 12kHL in only our second year with Tennent's quickly
gaining traction in South Africa.
In Asia/Pacific, our new agreements with ThaiBev in Singapore,
San Miguel in Thailand and Taiwan and San Miguel Mahou in India are
bedding in and are delivering growth. These are still nascent cider
markets and the contribution to Group volume and revenue remains
small. However, our partners are sizeable, high quality regional
players, with a demonstrable interest and understanding of the
category. Our opportunity and focus rests in extending these
arrangements to other fast growth markets in the region.
Distributor disruption in Australia and with a previous distributor
in India resulted in the loss of 13.1kHL (7.1%) of cider volumes,
dragging back volume, revenue and profit performance for the region
and the Export division.
Our Export volume is now 185kHL. We distribute to 60 markets
around the world delivering an operating margin of 24.5%. We see
opportunities for growth in all regions through building on our
existing relationships and establishing a presence in new
territories. We have seen real traction in both the Magners and
Tennent's brands in a broad range of overseas markets. Both brands
have the key attributes of heritage, provenance and quality and
carry excellent export potential as premium import
propositions.
Current Trading and Outlook
The current financial year has started satisfactorily. The
outlook for consumer spending is moderating across all our
territories but the return of inflation is presenting a firmer
pricing opportunity. We believe the enduring nature of our brands
and products, plus the quality and efficiency of our operations
ensure we can trade successfully in this environment. Each of our
three key brands has had its challenges in recent years, but
through continued investment and hard work they have weathered
these storms. We believe they are now in a position to build on the
robust volume performance of last year to deliver revenue and value
growth in FY2018.
It is early days in the launch of Outcider in Ireland and the
Bulmers brand re-fresh, but we are pleased with the market
reception to both campaigns so far. We have had a positive reaction
from the off-trade and are in roll-out to the on-trade, before the
next phase of marketing focused on outdoor, social media and
activation. Subject to satisfactory weather through Spring/Summer
we expect another good year for the cider category in Ireland and
our additional EUR4 million investment behind Bulmers is a margin
investment in the current year to build further momentum and an
improved share performance for the brand.
In Scotland, we are cautious on overall consumption and
anticipate volume in the IFT will remain in modest decline for the
year. Our opportunity in FY2018 is to continue to deliver an
improved value performance in Tennent's and further grow our
premium portfolio. We have made a solid start on both fronts with
new client wins and the new Tennent's founts having an impact.
In C&C Brands, our cider brands transferred to AB InBev in
two tranches on 1st February and 1st March, with minimal
disruption. Initial feedback from the market is positive and the
strategic logic for the combination is stronger than ever.
Collectively, we have set ourselves ambitious targets for the
partnership - but are confident the Magners brand can continue the
volume momentum achieved last year. The amended terms of our
distribution agreement for AB InBev's beers in Scotland and Ireland
came into effect from 1st January 2017. These will inevitably take
some of our AB InBev's agency volume and associated revenue and
margin out of Scotland and Ireland in FY2018, but will be
compensated by an improving contribution from cider in C&C
Brands. We have chosen to delay the full transfer of physical
distribution until the end of this year, which will push some of
the synergistic benefits of the partnership into FY2019.
In North America, the Magners brand is showing signs of recovery
but the continued declines in the overall cider category will limit
the progress we can expect from the Pabst partnership in the near
term. The business is stable and the increased focus on contract
opportunities will help cover overheads. The brighter spots within
the US cider market are Import and Regional and our portfolio is
well placed to take advantage of these. We remain convinced of the
strength and commercial logic of our combined PBC/GMB platform and
its ability to recover share and volume when the category
stabilises.
Export has made a satisfactory start to the year. We are nearing
completion of the switch of Australian distributor to Coca-Cola
Amatil (our existing New Zealand distributor). We are seeing good
category development progress in Asia Pacific, Europe and Africa
and it is clear we have a brand portfolio that resonates with
international audiences. The long-term prospects therefore remain
very positive. Our priorities will be to consolidate our
distribution network on larger high quality regional players that
can help us reduce volatility and drive sustainable growth in
volumes across multiple territories.
FINANCE REVIEW
Year Year Adjusted29 Change% AdjustedChange%
ended28 February2017EURm ended29 February2016EURm February2016(i)EURm
Net revenue 559.5 662.6 600.7 (15.6%) (6.9%)
Operating 95.0 103.2 95.4 (7.9%) (0.4%)
profit(iii)
Net finance costs (7.8) (8.6)
Profit before tax 87.2 94.6
Income tax expense (13.0) (13.8)
Effective tax rate 14.9% 14.6%
Profit for 74.2 80.8
the year
attributable
to
equityshareholders(iii)
Adjusted diluted 23.8 cent 24.2 cent (1.7%)
EPS(iv)
Dividend per Share 14.33 cent 13.65 cent 5.0%
Dividend payout 60.2% 56.4%
ratio
C&C is reporting net revenueof EUR559.5 million, operating
profit(iii) of EUR95.0 million and adjusted diluted EPS(iv) of 23.8
cent. On a constant currency(i) basis and after adjusting our North
America prior year results to be on a like for like basis with the
current financial year (as though the Pabst arrangement had been
operational in FY2016), net revenue decreased 6.9% and operating
profit(iii) decreased 0.4%.
FINANCE COSTS, INCOME TAX AND SHAREHOLDER RETURNS
Net finance cost was EUR7.8 million for the year (FY2016: EUR8.6
million). The finance cost benefited from favourable interest rates
and the pricing structure of the existing multi-currency debt
facility. Net finance costs included the unwind of a discount on
provisions charge of EUR0.8 million (FY2016: EUR0.8 million).
The income tax charge in the year was EUR13.0 million. This
excludes the credit in relation to exceptional items and represents
an effective tax rate of 14.9%, an increase of 0.3 percentage
points on the prior year. The Group is established in Ireland and
as a result it benefits from the 12.5% tax rate on profits
generated in Ireland. The increase in the effective tax rate was as
a result of a greater proportion of overall profits subject to
taxation coming from outside of Ireland in FY2017.
Subject to shareholder approval, the proposed final dividend of
9.37 cent per share will be paid on 14 July 2017 to ordinary
shareholders registered at the close of business on 26 May 2017.
The Group's full year dividend will therefore amount to 14.33 cent
per share, a 5.0% increase on the previous year. The proposed full
year dividend per share will represent a payout of 60.2% (FY2016:
56.4%) of the full year reported adjusted diluted earnings per
share (iv). This increase in both the dividend per share and payout
ratio reflects our confidence in the cash generation capability of
the business and the underlying stability of core earnings.
A scrip dividend alternative will be available. Total dividends
to ordinary shareholders in FY2017 amounted to EUR43.0 million, of
which EUR34.9 million was paid in cash and EUR8.1 million or 18.8%
(FY2016: 12.1%) was settled by the issue of new shares.
In addition to increased dividends, we invested EUR23.2 million
(including commission and related costs) in market share buybacks,
purchasing 6.14 million of our own shares at an average price of
EUR3.73. Our stockbrokers, Investec, conducted the share buyback
programme. All shares acquired during the current financial year
were subsequently cancelled.
EXCEPTIONAL ITEMS
Costs of EUR150.1 million were charged in FY2017 which, due to
their nature and materiality, were classified as exceptional items
for reporting purposes. In the opinion of the Board, this
presentation provides a more helpful analysis of the underlying
performance of the Group.
The main items which were classified as exceptional
include:-
(a) Impairment of intangible assets
To ensure that goodwill and brands considered to have an
indefinite useful economic life are not carried at a value above
their recoverable amount, impairment reviews are performed annually
or more frequently if there is an indication that their carrying
amount(s) may not be recoverable. The reviews compare the carrying
value of the assets with their recoverable amount using
value-in-use computations. In the current financial year, the
review resulted in an impairment of EUR106.6 million in the value
of our intangible assets with respect to the North American
business segment. In the US, the cider category remains in double
digit decline and the Group's US cider brands are lagging behind
the category. Whilst we believe that the category will recover in
the long-term and we remain committed to being part of the recovery
story, recent performance has been disappointing. In the short to
medium term the outlook is negative with a lack of visibility on
when momentum will return. As a consequence, we have rebased our
profit expectations and terminal growth rate for the US business,
leading to the impairment charge in the current financial year. All
other segments had sufficient headroom in their carrying
values.
(b) Restructuring costs
Restructuring costs of EUR12.7 million were incurred in the
year. This comprised of severance costs of EUR7.2 million and other
costs of EUR5.5 million. Severance costs primarily arose from the
reduction in headcount as a consequence of the rationalisation of
the Group's manufacturing footprint and other smaller
reorganisation programmes. Other costs of EUR5.5 million are
directly associated with the restructure of the Group's production
sites and include site closure costs and other costs directly
associated with the closures.
(c) Revaluation/impairment of property, plant &
equipment
In the current financial year we engaged external valuers to
value our properties in Vermont, resulting in a revaluation loss of
EUR17.7 million with respect to the land and buildings and a
revaluation loss of EUR5.1 million with respect to the plant and
machinery which were accounted for in the Income Statement. In
addition we took the decision to market value some of our assets in
Borrisoleigh, Ireland (EUR1.5 million) that were deemed surplus to
requirements and impair an element of the Group's IT system (EUR1.5
million) post the closure of Shepton Mallet.
(d) Onerous lease
A review was completed of the carrying value of our onerous
lease obligations during the year. The onerous lease provisions
carried forward relate to two leases for warehousing facilities
acquired as part of the acquisition of the Gaymers cider business
in 2010. The review took into account updated discount rates and
the latest estimate of remaining associated costs less economic
value. This resulted in an increase in the provision of EUR6.8
million. The relevant leases will expire in 2017 and 2026. A
further onerous lease provision of EUR0.2 million was created in
the current financial year in relation to our US business. This
lease will expire in 2018.
(e) Acquisition related expenditure
We incurred costs of EUR0.9 million associated with the
assessment and consideration of strategic opportunities during the
year.
(f) Net profit on disposal of property, plant &
equipment
Disposal of land & buildings and plant & machinery
realised a net profit of EUR2.9 million during the year. The
disposals related to assets that were surplus to requirement post
the site rationalisation and consolidation programme.
BALANCE SHEET STRENGTH, DEBT MANAGEMENT AND CASHFLOW
GENERATION
Balance sheet strength provides the Group with the financial
flexibility to pursue its strategic objectives. It is our policy to
ensure that a medium/long-term debt funding structure is in place
to provide us with the financial capacity to promote the future
development of the business and to achieve its strategic
objectives.
The Group has a EUR450 million multi-currency five year
syndicated revolving loan facility. The facility agreement provides
for a further EUR100 million in the form of an uncommitted
accordion facility and permits the Group to have additional
indebtedness to a maximum of EUR150 million, giving the Group debt
capacity of EUR700 million. The debt facility matures on 22
December 2019.
At 28 February 2017 net debt(vi) was EUR170.6 million,
representing a net debt(vi):EBITDA(ii) ratio of 1.55:1.
CASH GENERATION
Management reviews the Group's cash generating performance by
measuring the conversion of EBITDA(ii) to Free Cash Flow(v) as we
consider that this metric best highlights the underlying cash
generating performance of the continuing business.
The Group's performance during the year resulted in an
EBITDA(ii) to Free Cash Flow(v) conversion ratio pre exceptional
costs of 53%. A reconciliation of EBITDA(ii) to operating
(loss)/profit(iii) is set out below.
RECONCILIATION OF EBITDA(II) 2017 2016 2016Adj(i)
TO OPERATING(LOSS)/PROFIT
EURm EURm EURm
Operating (loss)/profit (55.1) 64.8
Exceptional items 150.1 38.4
Operating profit before exceptional items 95.0 103.2 95.4
Amortisation/depreciation 15.0 19.4 18.1
EBITDA(ii) 110.0 122.6 113.5
CASH FLOW SUMMARY 2017 2016
EURm EURm
EBITDA(ii) 110.0 122.6
Working capital 0.6 50.1
Advances to customers (12.4) (1.1)
Net finance costs (6.5) (5.7)
Tax paid (6.9) (10.2)
Pension contributions paid (3.4) (6.5)
Capital expenditure (22.7) (9.7)
Disposal proceeds property, 6.9 0.5
plant & equipment
Exceptional disposal proceeds 18.7 -
property, plant & equipment
Exceptional items paid (22.7) (13.0)
Other* (7.3) (13.6)
Free cash flow(v) 54.3 113.4
Free cash flow conversion ratio 49.4% 92.5%
- Exceptional cash outflow 22.7 13.0
- Exceptional cash inflows (18.7) -
- Exceptional cash net outflow 4.0 13.0
- Free cash flow excluding 58.3 126.4
exceptional cash outflow
- Free cash flow conversion 53.0% 103.1%
ratio excluding
exceptional cash outflow
Reconciliation to Group Condensed
Cash Flow Statement
Free cash flow(v) 54.3 113.4
Net proceeds from exercise of share 0.8 0.5
options/equity Interests
Shares purchased under share (23.2) (76.6)
buyback programme
Drawdown of debt 138.7 25.0
Repayment of debt (134.0) (0.1)
Acquisition of business/deferred - (3.3)
consideration paid
Net cash outflows re acquisition (1.5) -
of equity accounted investees
Dividends paid (34.9) (34.8)
Net increase in cash & cash equivalents 0.2 24.1
*Other relates to share options add back, pensions credited to
operating profit, net profit on disposal of property, plant &
equipment and recovery of previously impaired investment in equity
accounted investee.
FOREIGN CURRENCY AND COMPARATIVE REPORTING
2017 2016
Translation exposure Euro: Sterling (GBP) GBP0.834 GBP0.728
Euro: US Dollars ($) $1.101 $1.102
As shown above, the effective rate for the translation of
results from Sterling currency operations was EUR1:GBP0.834 (year
ended 29 February 2016: EUR1:GBP0.728) and from US Dollar
operations was EUR1:$1.101 (year ended 29 February 2016:
EUR1:$1.102).
ADJUSTMENT RE: NORTH AMERICA AND CONSTANT CURRENCY CALCULATION
FOR YEARED 28 FEBRUARY 2017 - COMPARATIVE REPORTING
Comparisons for revenue, net revenue and operating profit(iii)
for each of the Group's reporting segments are shown adjusted at
constant exchange rates for transactions by subsidiary undertakings
in currencies other than their functional currency and for
translation in relation to the Group's Sterling and US Dollar
denominated subsidiaries by restating the prior year at FY2017
effective rates.
We have also restated our FY2016 North America prior year
results to be on a like for like basis with the current financial
year (as though the Pabst arrangement had been operational in
FY2016). The Pabst arrangement changes fundamentally the revenue
and net revenue of the North America segment and therefore for
transparency we are restating FY2016 on a like for like basis.
Applying the realised FY2017 foreign currency rates to the
reported FY2016 revenue, net revenue and operating profit(iii) and
restating North America's FY2016 revenue and net revenue figures as
outlined above rebases the comparatives as shown below.
FXtransaction FXtranslation Year ended
Year ended29 February 2016 29 February2016adjusted comparative
Adjustment reNorth America
EURm EURm EURm EURm EURm
Revenue
Ireland 358.1 - (10.8) - 347.3
Scotland 339.8 - (43.2) - 296.6
C&C Brands 177.0 - (22.5) - 154.5
North America 47.5 - - (10.6) 36.9
Export 24.5 (0.1) - - 24.4
Total 946.9 (0.1) (76.5) (10.6) 859.7
Net revenue
Ireland 261.6 - (9.1) - 252.5
Scotland 227.4 - (28.9) - 198.5
C&C Brands 103.8 - (13.2) - 90.6
North America 45.3 - - (10.6) 34.7
Export 24.5 (0.1) - - 24.4
Total 662.6 (0.1) (51.2) (10.6) 600.7
Operating profit(iii)
Ireland 49.0 0.5 (2.6) - 46.9
Scotland 37.9 0.2 (4.8) - 33.3
C&C Brands 10.5 0.1 (1.3) - 9.3
North America 0.6 - - - 0.6
Export 5.2 0.1 - - 5.3
Total 103.2 0.9 (8.7) - 95.4
NOTES TO PRELIMINARY ANNOUNCEMENT
(i) FY2016 comparative adjusted for constant currency (FY2016
translated at FY2017 F/X rates) and North America revenues to be on
a like for like basis with the current financial year (as though
the Pabst arrangement had also been in operation for the whole of
FY2016). The like-for-like adjustment on North American revenues is
arising from Pabst partnership: Under the terms of the trading
arrangement with Pabst Brewing company ("PBC") which came into
effect on 1st March 2016, C&C's reported revenues now comprise
Cost of Goods Sold at production cost plus a royalty payment
representing one-third of the gross profit of the partnership.
C&C contributes one-third of marketing spend. All sales costs
are borne by PBC. The like-for-like adjustment for our US revenues
would have the effect of reducing our reported revenues for the
comparative period (FY2016) by EUR10.6m had the partnership been in
effect from 1st March 2015. See table above.(ii) EBITDA is earnings
before exceptional items, finance income, finance expense, tax,
depreciation, amortisation charges and equity accounted investees'
loss after tax. A reconciliation of the Group's operating (loss)/
profit to EBITDA is set out on page 18.(iii) Operating profit and
profit/finance expense for the year attributable to equity
shareholders is before exceptional items.(iv) Adjusted
basic/diluted earnings per share ('EPS') excludes exceptional
items. Please also see note 8 of the condensed financial
statements.(v) Free Cash Flow ('FCF') is a non GAAP measure that
comprises cash flow from operating activities net of capital
investment cash outflows which form part of investing activities.
FCF highlights the underlying cash generating performance of the
ongoing business. A reconciliation of FCF to Net Movement in Cash
& Cash Equivalents per the Group's Cash Flow Statement is set
out on page 18 and 19.(vi) Net debt comprises borrowings (net of
issue costs) less cash & cash equivalents.(vii) Off-trade:
Nielsen Scantrack 52wks to 27.02.17; on-trade: CGA OPMS MAT to
20.02.17.(viii) Nielsen Ireland databases to End Feb17 .(ix)
Rolling MAT February 2017 Brand Affinity Scores ("Drunk by people
like me" - Total sample).(x) GB Total Cider Off-trade: Nielsen
Scantrack 52wks to 27.02.17; on-trade: CGA OPMS MAT to
20.02.17.(xi) UK apple cider market by volume - MAT to Feb17
(Nielsen Scantrack 52wks to 27.02.17; on-trade: CGA OPMS MAT to
20.02.17).(xii) The Beer Institute Quarterly Cider Domestic &
Import Volumes - calendar 2016.
PRINCIPAL RISKS AND UNCERTAINTIES
The Directors consider that the principal risks and
uncertainties which could have a material impact on the Group's
performance over the remainder of the year remain substantially the
same as those stated on pages 24 to 26 of the Group's annual
financial statements for the year ended 29 February 2016, which are
available on our website, http://www.candcgroupplc.com.
Since publication of the 2016 Annual Report, the UK vote to
leave the European Union has created significant uncertainty about
the near term outlook and prospects for the UK, Irish and European
Union economies. While the economic effect of the UK leaving the
European Union is uncertain, it could have the effect of negatively
impacting the UK, Irish and European Union economies and currencies
and the financial performance of the Group, reducing demand in the
Group's markets and increasing business costs including through the
application of additional tariffs and transaction taxes on the
Group's products and raw materials. With our reporting currency as
the Euro, the Group is exposed to the translation impact of a
weaker Sterling. The Board and management will continue to consider
the impact on the Group's businesses, monitor developments and play
a role in influencing the UK, Irish and Scottish Governments to
help ensure a manageable outcome for our businesses. In FY2017, we
contributed to a House of Lords study on the implications of the UK
vote to leave the European Union on UK and Irish relations and are
also working closely with the Food and Drink Federation in Ireland
and the European Cider Association in relation to the implications
of the UK vote for our businesses. On an ongoing basis, we seek,
where appropriate, to mitigate currency risk through hedging and
structured financial contracts and take appropriate action to help
mitigate the consequences of any decline in demand in our
markets.
The Group anticipates a number of significant changes in
customer dynamics if recently publicised merger activity in both
the on and off-trade channels in the UK materialises. The changing
customer dynamics could result in the Group's options for route to
market access reducing, and an increase in customer influence in
terms of pricing and scale. The Board and management will continue
to monitor market activity closely and take relevant actions to
minimise the impact of such activity, by continuing to seek new
routes to market where possible, building brand equity of the
Group's core brands and enhancing existing relationships with key
partners and customers to continue to drive growth.
The Group entered into a new distribution agreement with AB
InBev in December 2016, giving them responsibility for the sale and
trade marketing of the Group's cider portfolio in England, Wales,
the Channel Islands and the Isle of Man and the majority of
national account customers in the UK. This significantly increases
the Group's reliance on third party distribution partners. The
Board and management will continuously monitor performance of the
agreement in terms of profitability, brand perception and other
identified key metrics to ensure this change in operating model is
successful.
GROUP CONDENSED INCOME STATEMENTFOR THE YEARED 28 FEBRUARY
2017
Year ended 28 February 2017 Year ended 29 February 2016
Beforeexceptionalitems Exceptionalitems Total Beforeexceptionalitems Exceptionalitems(note 6) Total
(note 6)
Notes EURm EURm EURm EURm EURm EURm
Revenue 4 818.1 - 818.1 946.9 - 946.9
Excise duties (258.6) - (258.6) (284.3) - (284.3)
Net revenue 4 559.5 - 559.5 662.6 - 662.6
Operating costs (464.5) (150.1) (614.6) (559.4) (38.4) (597.8)
Operating 4 95.0 (150.1) (55.1) 103.2 (38.4) 64.8
profit/(loss)
Finance income 0.1 - 0.1 0.2 - 0.2
Finance expense (7.9) - (7.9) (8.8) - (8.8)
Share of equity - - - - 0.1 0.1
accounted
investees'profit
after tax
Profit/(loss) 87.2 (150.1) (62.9) 94.6 (38.3) 56.3
before tax
Income (13.0) 3.0 (10.0) (13.8) 4.9 (8.9)
tax (expense)/credit
Profit/(loss) for the 74.2 (147.1) (72.9) 80.8 (33.4) 47.4
year attributableto
equity shareholders
Basic earnings per 8 (23.5) 14.4
share (cent)
Diluted earnings 8 (23.5) 14.2
per share (cent)
GROUP CONDENSED STATEMENT OF COMPREHENSIVE INCOMEFOR THE YEARED
28 FEBRUARY 2017
2017 2016
Notes EURm EURm
Other Comprehensive Income:
Items that may be reclassified (17.8) (20.9)
to Income Statement
in subsequent years:Foreign currency
translation differences arising on the
net investment in foreignoperations
Foreign currency reserve recycled - (0.1)
to Income Statement
on deemed disposal ofequity accounted investee
Reversal of previously recognised (2.1) -
gain on revaluation
of property, plant andequipment
Items that will not be reclassified to Income
Statement in subsequent years:
Actuarial gain/(loss) on retirement benefits 10 3.6 (5.1)
Deferred tax (charge)/credit on actuarial (0.4) 0.6
gain/(loss) on retirement benefits
Net loss recognised directly within (16.7) (25.5)
Other Comprehensive Income
(Loss)/profit for the year attributable (72.9) 47.4
to equity shareholders
Comprehensive (expense)/income for the year (89.6) 21.9
attributable to equityshareholders
GROUP CONDENSED BALANCE SHEETAS AT 28 FEBRUARY 2017
2017 2016
Notes EURm EURm
ASSETS
Non-current assets
Property, plant & equipment 144.5 180.0
Goodwill & intangible assets 530.3 644.1
Equity accounted investees 2.4 0.3
Retirement benefits 10 4.5 4.7
Deferred tax assets 3.2 4.4
Trade & other receivables 49.6 46.0
734.5 879.5
Current assets
Assets held for resale 1.7 10.3
Inventories 85.8 85.9
Trade & other receivables 78.5 94.1
Cash & cash equivalents 187.6 197.3
353.6 387.6
TOTAL ASSETS 1,088.1 1,267.1
EQUITY
Equity share capital 3.3 3.3
Share premium 136.9 127.8
Other reserves 99.1 121.0
Treasury shares (38.0) (39.2)
Retained income 337.1 471.8
Total equity 538.4 684.7
LIABILITIES
Non-current liabilities
Interest bearing loans & borrowings 358.6 361.1
Retirement benefits 10 22.3 22.7
Provisions 7.7 6.3
Deferred tax liabilities 6.0 5.5
394.6 395.6
Current liabilities
Interest bearing loans & borrowings - 0.2
Retirement benefits - 10.0
Trade & other payables 144.1 160.9
Provisions 6.5 12.6
Current tax liabilities 4.5 3.1
155.1 186.8
Total liabilities 549.7 582.4
TOTAL EQUITY & LIABILITIES 1,088.1 1,267.1
GROUP CONDENSED CASHFLOW STATEMENTFOR THE YEARED 28 FEBRUARY
2017
2017 2016
EURm EURm
CASH FLOWS FROM OPERATING ACTIVITIES
(Loss)/profit for the year attributable (72.9) 47.4
to equity shareholders
Finance income (0.1) (0.2)
Finance expense 7.9 8.8
Income tax expense 10.0 8.9
Profit on share of equity accounted investee - (0.1)
Revaluation/impairment of property, 25.8 16.0
plant & equipment
Recovery of previously impaired investment (0.5) -
in equity accounted investee
Impairment of intangible assets 106.6 -
Depreciation of property, plant & equipment 14.7 19.1
Amortisation of intangible assets 0.3 0.3
Net profit on disposal of property, (3.9) (0.2)
plant & equipment
Charge for equity settled share-based payments 0.7 0.5
Pension contributions paid plus amount (7.0) (11.0)
credited to Income Statement
81.6 89.5
(Increase)/decrease in inventories (2.9) 4.3
Decrease in trade & other receivables 4.0 45.9
Decrease in trade & other payables (13.3) (8.2)
(Decrease)/increase in provisions (4.6) 7.0
64.8 138.5
Interest received 0.1 0.2
Interest and similar costs paid (6.6) (5.9)
Income taxes paid (6.9) (10.2)
Net cash inflow from operating activities 51.4 122.6
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of property, plant & equipment (22.7) (9.7)
Net proceeds on disposal of property, 25.6 0.5
plant & equipment
Acquisition of business - (3.3)
Net cash outflow re acquisition (1.5) -
of equity accounted investees
Net cash inflow/(outflow) from 1.4 (12.5)
investing activities
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from exercise of share options 1.0 0.5
Drawdown of debt 138.7 25.0
Repayment of debt (134.0) (0.1)
Shares purchased to satisfy (0.2) -
share option entitlements
Shares purchased under share buyback programme (23.2) (76.6)
Dividends paid (34.9) (34.8)
Net cash outflow from financing activities (52.6) (86.0)
Net increase in cash & cash equivalents 0.2 24.1
Cash & cash equivalents at beginning of year 197.3 181.9
Translation adjustment (9.9) (8.7)
Cash & cash equivalents at end of year 187.6 197.3
A reconciliation of cash & cash equivalents to net debt is
presented in note 9.
GROUP CONDENSED STATEMENT OF CHANGES IN EQUITYFOR THE YEARED 28
FEBRUARY 2017
Equitysharecapital Sharepremium Otherundenominatedreserve Capitalreserve Share-basedpaymentsreserve Currencytranslationreserve Revaluationreserve Treasuryshares Retainedincome Total
EURm EURm EURm EURm EURm EURm EURm EURm EURm EURm
At 28 February 2015 3.5 122.5 0.5 24.9 6.4 100.9 9.1 (39.8) 545.2 773.2
Profit for the year - - - - - - - - 47.4 47.4
attributableto
equity shareholders
Other comprehensive - - - - - (21.0) - - (4.5) (25.5)
expense
Total - - - - - (21.0) - - 42.9 21.9
comprehensive(expense)/income
Dividend on ordinary - 4.8 - - - - - - (39.6) (34.8)
shares
Exercised share options - 0.5 - - - - - - - 0.5
Reclassification - - - - (0.5) - - - 0.5 -
of share-based
payments reserve
Joint Share Ownership - - - - - - - 0.6 (0.6) -
Plan
Shares purchased under (0.2) - 0.2 - - - - - (76.6) (76.6)
sharebuyback programme
andsubsequently
cancelled
Equity - - - - 0.5 - - - - 0.5
settled
share-basedpayments
Total transactions (0.2) 5.3 0.2 - - - - 0.6 (116.3) (110.4)
withowners
At 29 February 2016 3.3 127.8 0.7 24.9 6.4 79.9 9.1 (39.2) 471.8 684.7
Loss for the year - - - - - - - - (72.9) (72.9)
attributableto
equity shareholders
Other - - - - - (17.8) (2.1) - 3.2 (16.7)
comprehensive(expense)/income
Total comprehensive - - - - - (17.8) (2.1) - (69.7) (89.6)
expense
Dividend on ordinary - 8.1 - - - - - - (43.0) (34.9)
shares
Exercised share options - 0.8 - - - - - - - 0.8
Reclassification - - - - (2.0) - - - 2.0 -
of share-based
payments reserve
Joint Share Ownership - 0.2 - - (0.7) - - 1.2 (0.8) (0.1)
Plan
Shares purchased under - - - - - - - - (23.2) (23.2)
sharebuyback programme
andsubsequently
cancelled
Equity - - - - 0.7 - - - - 0.7
settled
share-basedpayments
Total transactions - 9.1 - - (2.0) - - 1.2 (65.0) (56.7)
withowners
At 28 February 2017 3.3 136.9 0.7 24.9 4.4 62.1 7.0 (38.0) 337.1 538.4
NOTES TO THE PRELIMINARY ANNOUNCEMENT
1. BASIS OF PREPARATION
The financial information presented in this report has been
prepared in accordance with the Listing Rules of the Irish Stock
Exchange and the UK Listing Authority and the accounting policies
that the Group has adopted under International Financial Reporting
Standards (IFRS) as approved by the European Union and issued by
the International Accounting Standards Board (IASB) for the
financial year ended 28 February 2017.
2.STATUTORY ACCOUNTS
The financial information prepared in accordance with IFRS as
adopted by the European Union included in this report does not
comprise "full group accounts" within the meaning of Regulation
40(1) of the European Communities (Companies: Group Accounts)
Regulations, 1992 of Ireland insofar as such group accounts would
have to comply with the disclosure and other requirements of those
Regulations. Full statutory accounts for the year ended 28 February
2017 prepared in accordance with IFRS, upon which the auditors have
given an unqualified report, have not yet been filed with the
Registrar of Companies. Full accounts for the year ended 29
February 2016, prepared in accordance with IFRS and containing an
unqualified audit report have been delivered to the Registrar of
Companies.
The information included has been extracted from the Group's
financial statements, which have been approved by the Board of
Directors on 17 May 2017.
3. REPORTING CURRENCY
The Group's financial statements are presented in Euro millions
to one decimal place. The results of the Group's subsidiaries with
non-Euro functional currencies have been translated into Euro at
average exchange rates for the year with the related balance sheets
consolidated using the closing rate at the balance sheet date.
Foreign currency movements arising on restatement of the results
and opening net assets of non-Euro functional currency companies at
closing rates are recognised in the Currency Translation Reserve
via the Statement of Comprehensive Income, together with currency
movements arising on foreign currency borrowings designated as net
investment hedges and currency movements arising on retranslation
of the Group's long-term Sterling and US Dollar intra group loans
which are considered quasi equity in nature and part of the Group's
net investment in its foreign operations.
The exchange rates used in translating Sterling and US Dollar
balance sheet and income statement amounts were as follows:-
2017 2016
Balance Sheet (closing rate): Euro: Sterling (GBP) GBP0.853 GBP0.786
Income Statement (average rate): Euro: Sterling (GBP) GBP0.834 GBP0.728
Balance Sheet (closing rate): Euro: US Dollars ($) $1.060 $1.091
Income Statement (average rate): Euro: US Dollars ($) $1.101 $1.102
4. SEGMENTAL REPORTING
The Group's business activity is the manufacturing, marketing
and distribution of alcoholic and soft drinks. Five operating
segments have been identified in the current and prior financial
periods; Ireland, Scotland, C&C Brands, North America and
Export.
The Group continually reviews and updates the manner in which it
monitors and controls its financial operations resulting in changes
in the manner in which information is classified and reported to
the Chief Operating Decision Maker ("CODM"). The CODM, identified
as the executive Directors comprising Stephen Glancey, Kenny Neison
and Joris Brams, assesses and monitors the operating results of
segments separately via internal management reports in order to
effectively manage the business and allocate resources.
The identified business segments are as follows:-
(i) Ireland
This segment includes the financial results from sale of own
branded products in the Island of Ireland, principally Bulmers,
Tennent's, Magners, Clonmel 1650, Heverlee, Roundstone Irish Ale,
Finches and Tipperary Water. It also includes the financial results
from beer and wines and spirits distribution and wholesaling
following the acquisition of Gleeson, and the results from sale of
third party brands as permitted under the terms of a distribution
agreement with AB InBev.
(ii) Scotland
This segment includes the results from sale of the Group's own
branded products in Scotland, with Tennent's, Heverlee, Caledonia
Premium Bottled Ales, Caledonia Best and Magners the principal
brands. It also includes the financial results from third party
brand distribution and wholesaling in Scotland following the
acquisition of the Wallaces Express wholesale business.
(iii) C&C Brands
This segment includes the results from sale of the Group's own
branded products in England & Wales, principally Magners,
Tennent's, Chaplin & Cork's and K Cider. It also includes the
distribution of the Italian lager Menabrea and the production and
distribution of private label cider products.
(iv) North America
This segment includes the results from sale of the Group's cider
and beer products, principally Woodchuck, Wyders, Magners,
Blackthorn, Hornsby's and Tennent's in the United States and
Canada.
(v) Export
This segment includes the sale and distribution of the Group's
own branded products, principally Magners, Gaymers, Blackthorn,
Hornsby's and Tennent's outside of Ireland, Great Britain and North
America. It also includes the sale of some third party brands.
The analysis by segment includes both items directly
attributable to a segment and those, including central overheads,
which are allocated on a reasonable basis in presenting information
to the CODM.
Inter-segmental revenue is not material and thus not subject to
separate disclosure.
(a) Reporting segment disclosures
2017 2016
Net Operating Net Operating
Revenue revenue profit Revenue revenue profit
EURm EURm EURm EURm EURm EURm
Ireland 338.9 242.3 48.6 358.1 261.6 49.0
Scotland 285.0 186.6 32.6 339.8 227.4 37.9
C&C Brands 145.9 83.8 7.3 177.0 103.8 10.5
North 24.5 23.1 0.7 47.5 45.3 0.6
America
Export 23.8 23.7 5.8 24.5 24.5 5.2
Total before 818.1 559.5 95.0 946.9 662.6 103.2
exceptional
items
Exceptional - - (150.1)* - - (38.4)**
items
(note 6)
Total 818.1 559.5 (55.1) 946.9 662.6 64.8
* Of the exceptional net loss in the current year, EUR10.3m
relates to Ireland, EUR1.2m relates to Scotland, EUR7.9m relates to
C&C Brands, EUR129.8m relates to North America and EUR0.9m
remains unallocated.** Of the exceptional loss in the prior year,
EUR12.9m relates to Ireland, EUR4.5m relates to Scotland, EUR19.7m
relates to C&C Brands, EUR1.1m relates to North America and
EUR0.2m relates to Export.
Total assets for the period ended 28 February 2017 amounted to
EUR1,088.1m (2016: EUR1,267.1m).
(b) Other operating segment information
2017 2016
CapitalexpenditureEURm Depreciation/amortisation/impairmentEURm CapitalexpenditureEURm Depreciation/amortisation/impairmentEURm
Ireland 20.3 8.1 6.0 7.5
Scotland 2.1 5.3 1.7 6.7
C&C Brands - 2.2 0.2 2.7
North America 2.8 108.4 0.4 2.0
Export 0.6 0.6 0.5 0.5
Total 25.8 124.6 8.8 19.4
(c) Geographical analysis of revenue and net revenue
Revenue Net revenue
2017 2016 2017 2016
EURm EURm EURm EURm
Ireland 338.9 358.1 242.3 261.6
Scotland 285.0 339.8 186.6 227.4
England and Wales* 145.9 177.0 83.8 103.8
US and Canada** 24.5 47.5 23.1 45.3
Other*** 23.8 24.5 23.7 24.5
Total 818.1 946.9 559.5 662.6
* England and Wales reflects the C&C Brands segment.** US
and Canada reflects the North America segment.***Other reflects the
Export segment, being all other geographical locations excluding
Ireland, Great Britain, the US and Canada.
The geographical analysis of revenue and net revenue is based on
the location of the third party customers.
(d) Geographical analysis of non-current assets
IrelandEURm ScotlandEURm Englandand US Other***EURm TotalEURm
Wales*EURm andCanada**EURm
28 February
2017
Property, 70.3 58.0 0.3 9.9 6.0 144.5
plant
& equipment
Goodwill & 156.1 126.4 187.2 44.6 16.0 530.3
intangible
assets
Equity 0.3 0.3 - 1.8 - 2.4
accounted
investees
Retirement 4.5 - - - - 4.5
benefits
Deferred 3.2 - - - - 3.2
tax
assets
Trade & 20.6 25.6 1.2 1.8 0.4 49.6
other
receivables
Total 255.0 210.3 188.7 58.1 22.4 734.5
IrelandEURm ScotlandEURm Englandand US Other***EURm TotalEURm
Wales*EURm andCanada**EURm
29 February
2016
Property, 60.3 67.1 16.1 30.8 5.7 180.0
plant
& equipment
Goodwill & 156.2 135.6 189.2 147.1 16.0 644.1
intangible
assets
Equity - 0.3 - - - 0.3
accounted
investees
Retirement 4.7 - - - - 4.7
benefits
Deferred 4.4 - - - - 4.4
tax
assets
Trade & 15.0 29.7 1.3 - - 46.0
other
receivables
Total 240.6 232.7 206.6 177.9 21.7 879.5
* England and Wales reflects the C&C Brands segment.** US
and Canada reflects the North America segment.***Other reflects the
Export segment, being all other geographical locations excluding
Ireland, Great Britain, the US and Canada.
The geographical analysis of non-current assets, with the
exception of Goodwill & intangible assets, is based on the
geographical location of the assets. The geographical analysis of
Goodwill & intangible assets is allocated based on the country
of destination of sales at date of application of IFRS 8 Operating
Segments or date of acquisition, if later.
5. CYCLICALITY OF OPERATIONS
Operating profit performance in the drinks industry is not
characterised by significant cyclicality. Operating profit before
exceptional items for the financial year ended 28 February 2017 was
split H1: 58% and H2: 42%.
6. EXCEPTIONAL ITEMS
2017 2016
EURm EURm
Operating costs
Impairment of intangible asset 106.6 -
Restructuring costs 12.7 18.2
Revaluation/impairment of property, plant & equipment 25.8 16.0
Onerous lease 7.0 -
Acquisition related expenditure 0.9 0.7
Net profit on disposal of property, plant & equipment (2.9) -
Integration costs - 3.0
Other - 0.5
150.1 38.4
Foreign currency reclassified on deemed disposal - (0.1)
of equity accounted investee
Total loss before tax 150.1 38.3
Income tax credit (3.0) (4.9)
Total loss after tax 147.1 33.4
(a) Impairment of intangible asset
To ensure that goodwill and brands considered to have an
indefinite useful economic life are not carried at above their
recoverable amount, impairment reviews are performed annually or
more frequently if there is an indication that their carrying
amount(s) may not be recoverable, comparing the carrying value of
the assets with their recoverable amount using value-in-use
computations. In the current financial year, as a result of such a
review, the Group impaired the value of its intangible asset with
respect to the Group's North American business segment by
EUR106.6m.
(b) Restructuring costs
Restructuring costs of EUR12.7m were incurred in the current
financial year (2016: EUR18.2m). These restructuring costs
comprised of severance costs of EUR7.2m (2016: EUR14.5m) primarily
arising from the Group's previously announced consolidation of its
production sites in Borrisoleigh and Shepton Mallet into the
Group's manufacturing site in Clonmel and the consequential
reduction in staff numbers as a result of this consolidation and
other smaller reorganisation programmes during the year across the
Group. Other costs of EUR5.5m (2016: EUR3.7m) are directly
associated with the restructure of the Group's production sites and
included costs from the closure of the Group's operations in
Borrisoleigh and Shepton Mallet until their final disposal and
other costs directly associated with the closures.
(c) Revaluation/impairment of property, plant &
equipment
Property (comprising land and buildings) and plant &
machinery are valued at fair value on the Balance Sheet and
reviewed for impairment on an annual basis.
During the current financial year, the Group engaged external
valuers, Lawrence K. Martin, MAI, Certified General Real Estate
Appraiser - Martin Appraisal Services, Inc. to value the land and
buildings at the Group's Vermont site and John Coto, Certified
Machine & Equipment Appraiser, Alliance Machinery &
Equipment Appraisals to value the plant and machinery at the
Group's Vermont site. This resulted in a revaluation loss of
EUR17.7m with respect to the land and buildings and a revaluation
loss of EUR5.1m with respect to the plant and machinery which was
accounted for in the Income Statement. Also during the current
financial year the Group took the decision to market value some of
our assets at Borrisoleigh, Ireland, which resulted in the booking
of an impairment charge of EUR1.5m and we took a decision to impair
an element of the Group's IT system by EUR1.5m post the closure of
Shepton Mallet.
During the prior financial year, the Group engaged external
valuers Timothy Smith, BSc MRICS, RICS Registered Valuer and Daniel
Tompkinson BSc MRICS RICS Registered Valuer - Gerald Eve LLP to
value the land and buildings at the Shepton Mallet site; Derek
Elston FRCIS RICS Registered Valuer - Elston Sutton Industrial
Appraisal Limited to value the plant and equipment at the Shepton
Mallet site; Ronan Diamond RICS Registered Valuer (VRS) BSc (Hons)
Dip MSCSI MRICS and Brian Gilson RICS Registered Valuer (VRS) Dip
Prop Inv MSCSI MRICS FCI Arb - Lisney to value the freehold
property at the Borrisoleigh site; and Don Meghen - Lisney to value
the plant & machinery at Borrisoleigh. This resulted in a
revaluation loss of EUR16.0m accounted for in the Income
Statement.
(d) Onerous lease
During the current financial year, the Group reviewed the
carrying value of its onerous lease provision to take into account
the latest estimate of associated costs less economic value with
regard to the two pre-existing onerous leases up until their final
disposal. The discount rate applied to the liability was also
re-assessed. This resulted in an increase in the provision of
EUR6.8m. This element of the onerous lease provision relates to two
onerous leases in relation to warehousing facilities acquired as
part of the acquisition of the Gaymers cider business in 2010.
These onerous leases will expire in 2017 and 2026 respectively.
The Group also recognised an onerous lease with regard to a
surplus facility at its US business of EUR0.2m in the current
financial year. This lease will expire in 2018.
(e) Acquisition related expenditure
In the current financial year the Group incurred professional
fees of EUR0.9m (2016:EUR0.7m) associated with the assessment and
consideration of strategic opportunities by the Group during the
year.
(f) Net profit on disposal of property, plant &
equipment
In the current financial year the Group disposed of land &
buildings and plant & machinery which were surplus to
requirements arising from the Group's consolidation of its
production facilities realising a net profit of EUR2.9m.
(g) Integration costs
During the prior financial year the Group incurred costs of
EUR3.0m primarily in relation to the continued integration of the
previously acquired Wallaces Express with the Group's existing
Scottish business.
(h) Other
During the prior financial year the Group incurred costs of
EUR0.5m in relation to a one-off shortage in a key process gas. The
business was forced to limit production for a period and incur
additional costs in sourcing gas due to a plant failure at its key
supplier.
(i) Foreign currency reclassified on deemed disposal of equity
accounted investee
In the prior financial year, on 3 August 2015, the Group
acquired the remaining equity share capital of Thistle Pub Company
Limited. This purchase followed the acquisition of an initial stake
in the business in November 2012. Under IAS 28 Investments in
Associates and Joint Ventures this necessitated the deemed disposal
of the Group's initial investment which was classified as an equity
accounted investee and the recognition of the acquisition of
control of the business under IFRS 3 Business Combinations. The
Group recognised a cumulative gain of EUR0.1m in the foreign
currency reserve from date of initial investment which was recycled
to the Income Statement following the deemed disposal.
7. DIVIDS
2017 2016
EURm EURm
Dividends paid:
Final: paid 8.92c per ordinary share in July 27.7 23.6
2016 (2016: 7.0c paid in July 2015)
Interim: paid 4.96c per ordinary share in December 15.3 16.0
2016 (2016: 4.73c paid inDecember 2015)
Total equity dividends 43.0 39.6
Settled as follows:
Paid in cash 34.9 34.8
Scrip dividend 8.1 4.8
43.0 39.6
The Directors have proposed a final dividend of 9.37 cent per
share (2016: 8.92 cent), to ordinary shareholders registered at the
close of business on 26 May 2017, which is subject to shareholder
approval at the Annual General Meeting, giving a proposed total
dividend for the year of 14.33 cent per share (2016: 13.65 cent).
Using the number of shares in issue at 28 February 2017 and
excluding those shares for which it is assumed that the right to
dividend will be waived, this would equate to a distribution of
EUR29.5m.
Total dividends of 13.88 cent per ordinary share were recognised
as a deduction from the retained income reserve in the year ended
28 February 2017 (2016: 11.73 cent).
Final dividends on ordinary shares are recognised as a liability
in the financial statements only after they have been approved at
an Annual General Meeting of the Company. Interim dividends on
ordinary shares are recognised when they are paid.
8. EARNINGS PER SHARE
2017 2016
Number Number
'000 '000
Denominator computations
Number of shares at beginning of year 329,158 348,547
Shares issued in lieu of dividend 2,209 1,312
Shares issued in respect of options exercised 318 146
Shares repurchased and subsequently cancelled (6,139) (20,847)
Number of shares at end of year 325,546 329,158
Weighted average number of 310,431 329,044
ordinary shares (basic)*
Adjustment for the effect 995 5,316
of conversion of options
Weighted average number of ordinary shares, 311,426 334,360
including options (diluted)
* excludes 11.9m treasury shares (2016: 16.4m)
Profit attributable to ordinary shareholders 2017 2016
EURm EURm
Earnings as reported (72.9) 47.4
Adjustment for exceptional 147.1 33.4
items, net of tax (note 6)
Earnings as adjusted for exceptional 74.2 80.8
items, net of tax
Basic earnings per share Cent Cent
Basic earnings per share (23.5) 14.4
Adjusted basic earnings per share 23.9 24.6
Diluted earnings per share
Diluted earnings per share (23.5)* 14.2
Adjusted diluted earnings per share 23.8 24.2
* Due to the reported loss for the year the basic and diluted
earnings per share are the same.
Basic earnings per share is calculated by dividing the profit
attributable to the ordinary shareholders by the weighted average
number of ordinary shares in issue during the year, excluding
ordinary shares purchased/issued by the Company and accounted for
as treasury shares (at 28 February 2017: 11.9m shares; at 29
February 2016: 16.4m shares).
Diluted earnings per share is calculated by adjusting the
weighted average number of ordinary shares outstanding to assume
conversion of all potential dilutive ordinary shares. The average
market value of the Company's shares for purposes of calculating
the dilutive effect of share options was based on quoted market
prices for the period of the year that the options were
outstanding.
Employee share awards (excluding awards which were granted under
plans where the rules stipulate that obligations must be satisfied
by the purchase of existing shares), which are performance-based
are treated as contingently issuable shares because their issue is
contingent upon satisfaction of specified performance conditions in
addition to the passage of time and continuous employment. In
accordance with IAS 33 Earnings per Share, these contingently
issuable shares are excluded from the computation of diluted
earnings per share where the vesting conditions would not have been
satisfied as at the end of the reporting period (3,424,695 at 28
February 2017 and 2,244,908 at 29 February 2016). If dilutive other
contingently issuable ordinary shares are included in diluted EPS
based on the number of shares that would be issuable if the end of
the reporting period was the end of the contingency period.
9. ANALYSIS OF NET DEBT
1 March2016 Translationadjustment Debtarising onacquisition Cash flow,net Non-cashchanges 28 February2017
EURm EURm EURm EURm EURm EURm
Group
Interest bearing loans & borrowings 360.3 (7.8) - 4.7 1.0 358.2*
Cash & cash equivalents (197.3) 9.9 - (0.2) - (187.6)
163.0 2.1 - 4.5 1.0 170.6
*Interest bearing loans & borrowings at 28 February 2017 are net of unamortised issue costs of EUR1.1m of which EUR0.4m is classified on the balance sheet as a currentasset.
1 March2015 Translationadjustment Debtarising onacquisition Cash flow,net Non-cashchanges 29 February2016
EURm EURm EURm EURm EURm EURm
Group
Interest bearing loans & borrowings 339.7 (7.7) 2.4 24.9 1.0 360.3*
Cash & cash equivalents (181.9) 8.7 - (24.1) - (197.3)
157.8 1.0 2.4 0.8 1.0 163.0
*Interest bearing loans & borrowings at 29 February 2016 are net of unamortised issue costs of EUR2.1m of which EUR1.0m is classified on the balance sheet as a currentasset.
The non-cash change to the Group's interest bearing loans and
borrowings relate to the amortisation of issue costs of EUR1.0m
(2016: EUR1.0m).
Borrowing facilities
The Group manages its borrowing requirements by entering into
committed loan facility agreements.
In December 2014, the Group amended and updated its committed
EUR450m multi-currency five year syndicated revolving loan facility
with seven banks, namely Bank of Ireland, Bank of Scotland,
Barclays Bank, Danske Bank, HSBC, Rabobank, and Ulster Bank,
repayable in a single instalment on 22 December 2019. The facility
agreement provides for a further EUR100m in the form of an
uncommitted accordion facility and permits the Group to avail of
further financial indebtedness, excluding working capital and
guarantee facilities, to a maximum value of EUR150m, subject to
agreeing the terms and conditions with the lenders. Consequently
the Group is permitted under the terms of the agreement, to have
debt capacity of EUR700m of which EUR359.3m was drawn at 28
February 2017 (2016: EUR360.4m).
Under the terms of the agreement, the Group must pay a
commitment fee based on 40% of the applicable margin on undrawn
committed amounts and variable interest on drawn amounts based on
variable Euribor/Libor interest rates plus a margin, the level of
which is dependent on the net debt: EBITDA ratio, plus a
utilisation fee, the level of which is dependent on percentage
utilisation. The Group may select an interest period of one, two,
three or six months.
All non-current bank loans drawn under the Group's
multi-currency revolving loan facility are guaranteed by a number
of the Group's subsidiary undertakings. The facility agreement
allows the early repayment of debt without incurring additional
charges or penalties. All such non-current bank loans under the
Group's multi currency revolving loan facility are repayable in
full on change of control of the Group.
The Group's multi-currency debt facility incorporates two
financial covenants:
-- Interest cover: The ratio of EBITDA to net interest for a period of 12
months ending on each half-year date will not be less than
3.5:1
-- Net debt/EBITDA: The ratio of net debt on each half-year date to
EBITDA for a period of 12 months ending on a half-year date will
not
exceed 3.5:1
The Group complied with both covenants throughout the current
and prior financial year.
10. RETIREMENT BENEFITS
The Group operates a number of defined benefit pension schemes
for certain employees, past and present, in the Republic of Ireland
(ROI) and in Northern Ireland (NI), all of which provide pension
benefits based on final salary and the assets of which are held in
separate trustee administered funds. The Group closed its defined
benefit pension schemes to new members in March 2006 and provides
only defined contribution pension schemes for employees joining the
Group since that date. The Group provides permanent health
insurance cover for the benefit of certain employees and separately
charges this to the Income Statement.
The defined benefit pension scheme assets are held in separate
trustee administered funds to meet long-term pension liabilities to
past and present employees. The trustees of the funds are required
to act in the best interest of the funds' beneficiaries. The
appointment of trustees to the funds is determined by the schemes'
trust documentation. The Group has a policy in relation to its
principal staff pension fund that members of the fund should
nominate half of all fund trustees.
There are no active members remaining in the Executive defined
benefit pension scheme (2016: no active members). There are 62
active members, representing less than 10% of total membership, in
the ROI Staff defined benefit pension scheme (2016: 63 active
members) and 4 active members in the NI defined benefit pension
scheme (2016: 4 active members). The Group's ROI defined benefit
pension reform programme concluded during the financial year ended
29 February 2012 with the Pensions Board issuing a directive under
Section 50 of the Pensions Act 1990 to remove the mandatory pension
increase rule, which guaranteed 3% per annum increase to certain
pensions in payment, and to replace it with guaranteed pension
increases of 2% per annum for each year 2012 to 2015 and thereafter
for all future pension increases to be awarded on a discretionary
basis.
In the prior financial year the Group offered deferred members
of its two ROI defined benefit pension schemes an opportunity to
transfer out of the schemes, giving the deferred member greater
control and flexibility over their pension arrangements. This offer
concluded in the current financial year. In total 119 deferred
members availed of the offer and have transferred out of the
scheme. The closing liability of the two ROI defined benefit
pension schemes as at 28 February 2017 is a deficit of EUR22.3m.
The NI defined benefit pension scheme is reporting a surplus of
EUR4.5m as at 28 February 2017.
Actuarial valuations - funding requirements
Independent actuarial valuations of the defined benefit pension
schemes are carried out on a triennial basis using the attained age
method. The most recent actuarial valuations of the ROI schemes
were carried out with an effective date of 1 January 2015 while the
date of the most recent actuarial valuation of the NI scheme was 31
December 2014. The actuarial valuations are not available for
public inspection; however the results of the valuations are
advised to members of the various schemes.
The funding requirements in relation to the Group's ROI defined
benefit pension schemes are assessed at each valuation date and are
implemented in accordance with the advice of the actuaries. Arising
from the formal actuarial valuations of the main schemes the Group
has committed to contributions of 22% of pensionable salaries along
with a deficit contribution of EUR1.2m per annum until the next
valuation date for the Group's Staff defined benefit pension
scheme. There is no funding requirement with respect to the Group's
Executive defined benefit pension scheme in 2017. The funding
requirement will be reviewed again as part of the next triennial
valuation in January 2018. The 2014 actuarial valuation of the NI
defined benefit pension scheme confirmed it was in surplus and the
scheme remains in surplus.
The schemes' independent actuary, Mercer (Ireland) Limited, has
employed the projected unit credit method to determine the present
value of the defined benefit obligations arising and the related
current service cost.
At 28 February 2017, the retirement benefits computed in
accordance with IAS19 (R) Employee Benefits amounted to a net
deficit of EUR17.8m gross of deferred tax (EUR22.3m deficit with
respect to the ROI schemes and a EUR4.5m surplus with respect to
the NI scheme) and EUR15.9m net of deferred tax (2016: EUR28.0m
gross and EUR24.9m net of deferred tax).
The movement in the net deficit is as follows:-
EURm
Deficit at 1 March 2016 28.0
Employer contributions paid (3.4)
Actuarial gain (3.6)
Credit to the Income Statement (3.6)
FX adjustment on retranslation 0.4
Net deficit at 28 February 2017 17.8
Comprising:
ROI scheme retirement benefits deficit 22.3
NI scheme retirement benefits surplus (4.5)
Net deficit at 28 February 2017 17.8
The decrease in the deficit from EUR28.0m to EUR17.8m is
primarily driven by the employer contributions of EUR3.4m, a credit
to the income statement of EUR3.6m primarily arising from a
settlement gain with respect to deferred members who opted to
transfer out of the defined benefit schemes, and a EUR3.6m net gain
arising from favourable returns on plan assets partially offset by
the negative effects of lower discount rates on liabilities.
All other significant assumptions applied in the measurement of
pension obligations at 28 February 2017 are broadly consistent with
those as applied at 29 February 2016.
11. RELATED PARTY TRANSACTIONS
The principal related party relationships requiring disclosure
in the consolidated financial statements of the Group under IAS 24
Related Party Disclosures pertain to the existence of subsidiary
undertakings and equity accounted investees, transactions entered
into by the Group with these subsidiary undertakings and equity
accounted investees and the identification and compensation of, and
transactions with, key management personnel.
Group Transactions
Transactions between the Group and its related parties are made
on terms equivalent to those that prevail in arm's length
transactions.
Subsidiary undertakings
The consolidated financial statements include the financial
statements of the Company and its subsidiaries. Sales to and
purchases from subsidiary undertakings, together with outstanding
payables and receivables, are eliminated in the preparation of the
consolidated financial statements in accordance with IFRS 10
Consolidated Financial Statements.
Equity accounted investees
In the current financial year, on 20 December 2016, the Group
acquired 25% of the equity share capital of Whitewater Brewing
Company Limited ("Whitewater"), an Irish Craft brewer for GBP0.3m
(EUR0.3m euro equivalent at date of transaction). Also in the
current financial year, on 11 May 2016, the Group acquired 14% of
the equity share capital of a Canadian Company, for CAD$2.5m
(EUR1.7m euro equivalent on date of investment). Details of
transactions between the Group and both Whitewater and the Canadian
Company, from date of investment, are disclosed below.
During the financial year ended 28 February 2015, the Group
entered into a joint venture arrangement with Heather Ale Limited,
run by the Williams brothers who are recognised as leading family
craft brewers in Scotland, to form a new entity Drygate Brewing
Company Limited. The joint venture, which is run independently of
the joint venture partners existing businesses, operates a craft
brewing and retail facility adjacent to Wellpark brewery. Details
of transactions between the Group and Drygate Brewing Company
Limited during the current and prior financial year and outstanding
year end balances are disclosed below.
The Group also holds a 50% investment in Beck & Scott
(Services) Limited (Northern Ireland) and a 45.61% investment in
The Irish Brewing Company Limited (Ireland) following its
acquisition of Gleeson. Transactions between the Group and Beck
& Scott (Services) Limited (Northern Ireland) are disclosed
below. The Group had no transactions with The Irish Brewing Company
Limited (Ireland) which is a non-trading entity.
A subsidiary of the Group holds a 33% investment in Shanter Inns
Limited. Transactions between the Group and Shanter Inns Limited
are disclosed below.
On 28 November 2012, the Group acquired an equity investment in
Thistle Pub Company Limited, a joint venture with Maclay Group plc.
The Group subsequently acquired the remaining equity share capital
of the Thistle Pub Company Limited business in the prior financial
year on 3 August 2015. The Group therefore accounted for Thistle
Pub Company Limited as a related party in the prior financial year
from date of the initial equity investment, on 28 November 2012, to
date of deemed disposal of this initial investment and subsequent
acquisition of 100% Thistle Pub Company Limited on 3 August
2015.
On 21 March 2012, the Group acquired a 25% equity investment in
Maclay Group plc. The Maclay Group plc went into administration
during the financial year ended 28 February 2015 and the Group
consequently impaired its investment in this entity. The Group
continued to trade with Maclay Inns Limited (in administration), a
100% owned subsidiary of the Maclay Group plc (in administration)
in the prior financial year and details of transactions are
disclosed below. In the current financial year the Group did not
trade with Maclay Inns Limited however it did receive an interim
distribution of EUR0.5m as part of the administration process.
Loans extended by the Group to equity accounted investees are
considered trading in nature and are included within advances to
customers in Trade & other receivables.
Details of transactions with equity accounted investees during
the year and related outstanding balances at the year end are as
follows:-
Net revenue Balance outstanding
2017 2016 2017 2016
EURm EURm EURm EURm
Sale of goods to equity
accounted investees:
Beck & Scott (Services) Limited 0.2 - - -
(Northern Ireland)
Drygate Brewing Company Limited 0.2 0.3 0.1 0.1
Maclay Group plc - 0.8 - -
Thistle Pub Company Limited n/a 0.4 n/a -
Shanter Inns Limited - 0.3 - -
0.4 1.8 0.1 0.1
Balance outstanding
2017 2016
EURm EURm
Loans to equity accounted
investees:
Canadian Investment 1.8 -
Whitewater Brewing 0.7 -
Company Limited
Drygate Brewing Company Limited 0.7 2.1
Shanter Inns Limited - 0.1
3.2 2.2
Purchases Balance outstanding
2017 2016 2017 2016
EURm EURm EURm EURm
Purchase of goods from equity
accounted investees:
Whitewater Brewing 0.1 - - n/a
Company Limited
Drygate Brewing Company Limited 0.6 0.1 0.2 0.1
0.7 0.1 0.2 0.1
All outstanding trading balances with equity accounted
investees, which arose from arm's length transactions, are to be
settled in cash within one month of the reporting date.
Key management personnel
For the purposes of the disclosure requirements of IAS 24
Related Party Disclosures, the Group has defined the term 'key
management personnel', as its executive and non-executive
Directors. Executive Directors participate in the Group's equity
share award schemes and death in service insurance programme and in
the case of UK resident executive Directors are covered under the
Group's permanent health insurance programme. The Group also
provides private medical insurance for UK resident executive
Directors. No other non-cash benefits are provided. Non-executive
Directors do not receive share-based payments or post employment
benefits.
Details of key management remuneration are as follows:-
2017 2016
Number Number
Number of individuals 10 10
EURm EURm
Salaries and other short term employee benefits 2.4 2.9
Post employment benefits 0.3 0.3
Equity settled share-based payments 0.1 -
Further amount paid re exercise of JSOP Interests 0.2 -
Dividend equivalent payment with 0.6 -
respect to JSOP Interests
Dividend income with respect of JSOP Interests - 0.4
Total 3.6 3.6
Two of the Group's executive Directors were awarded Interests
under the Group's Joint Share Ownership Plan (JSOP). When an award
is granted to an executive under the Group's JSOP, its value is
assessed for tax purposes with the resulting value being deemed to
fall due for payment on the date of grant. Under the terms of the
Plan, the executive must pay the Entry Price at the date of grant
and, if the tax value exceeds the Entry Price, he must pay a
further amount, equating to the amount of such excess, before an
exercise/sale of the awarded Interests. The deferral of the payment
of the further amount was considered to be an interest-free loan by
the Company to the executive and a taxable benefit-in-kind arose,
charged at the Revenue stipulated rates (Ireland 13.5% from 1
January 2013 and UK 3.25% to 5 April 2015 and 3.0% from 6 April
2015). In the current financial year the Group's executive
Directors exercised their JSOP Interests and paid the further
amount on exercise. Under the terms of the Plan, when the further
amount is paid, the Company compensates the executive for the
obligation to pay this further amount by paying him an equivalent
amount, which is, however, subject to income tax and social
security in the hands of the executive. This compensation is
disclosed in the table above under Further amount.
The balances of the loans outstanding to the executive Directors
in the context of the above as at 28 February 2017 and 29 February
2016 are as follows:-
28 February2017EUR'000 29 February2016EUR'000
Stephen Glancey - 111
Kenny Neison - 83
Total - 194
The highest amount due during the year, with respect to these
loans, were the amounts outstanding as at 29 February 2016.
Also during the year and pursuant to a contract for services
effective as of 1 April 2014 between C&C IP Sàrl ('CCIP') and
Joris Brams BVBA ('JBB'), (a company wholly owned by Joris Brams
and family), CCIP paid fees of EUR91,550 to JBB in respect of brand
development services provided by JBB to CCIP in relation to Belgian
products.
View source version on businesswire.com:
http://www.businesswire.com/news/home/20170516006826/en/
This information is provided by Business Wire
(END) Dow Jones Newswires
May 17, 2017 02:00 ET (06:00 GMT)
C&c (LSE:CCR)
Historical Stock Chart
From Apr 2024 to May 2024
C&c (LSE:CCR)
Historical Stock Chart
From May 2023 to May 2024